Liffe members to receive 10m pounds windfall

AN UNEXPECTED trading boom this year at Liffe, the London International Financial Futures and Options Exchange, will allow exchange executives to give a one-off pounds 10m payout to its members.

From January to November 1992, Liffe's volumes soared by 90 per cent over the same period in 1991 to 67.9 million futures and options contracts, catapulting it even further ahead of rivals as Europe's top derivatives exchange.

But, less than a year after its pounds 31m move to new City facilities at Cannon Bridge, success is also giving Liffe overcrowding problems.

Exchange officials deny that they are thinking about moving again, and say that they expect the building to last them another three years.

However, 'claustrophobic' conditions in parts of the trading area - where traders stand in 'pits' and buy and sell contracts in open outcry - mean Liffe will undergo a big redevelopment in 1993. This could increase the number of pits from 20 to 26.

Nicholas Durlacher, the chairman, has told members that, as a result of buoyant business, they will be receiving rebates on exchange fees after the number of contracts traded in the financial year to 31 December has been calculated.

According to Michael Jenkins, chief executive, Liffe conservatively estimates volumes each year and sets transaction charges to members based on the forecast.

'But the volume this year has been very much higher than we budgeted for,' he said.

The exchange is not a profit- making operation. So once it tops up its reserves with the year's takings, it returns spare cash to the membership. This is calculated on the basis of how much they paid the exchange in fees per trade and trading facilities rental.

Members pay 90p for a complete futures trade and 60p for an options trade, plus annual exchange subscription fees of pounds 5,000 and between pounds 1,000 and pounds 3,000 to rent a booth. Liffe members also received rebates in 1988 and 1989.

Members are being consulted about the floor redevelopment plans which, said Ian Bush, head of exchange operations, will involve removing huge slabs holding up the offices to increase the two- story trading floor space. The facelift could cost anything from hundreds of thousands to millions of pounds.

Space constraints are most pressing in the European interest rate contracts area, where business in the German bund, the euromark, the euroswiss and the Italian treasury bond BTP has boomed.

And while floor capacity on the 25,000 sq ft space is for 2,100 people, the population has already nearly doubled from 800 at the time of the move to 1,500.